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WTO panel slams European aid for Airbus

The WTO has dealt the European Union a painful blow in a transatlantic trade dispute over subsidies for the US aircraft industry, ruling some state support for Airbus illegal. But the legal battles are far from over.

Subsidy cuts could stop Airbus developing new aircraft

The World Trade Organization (WTO) gave the European Union a stinging rebuke on Wednesday, saying the EU must stop protecting plane-maker Airbus against competition from its US rival Boeing.

In a 1,200-page ruling, the global trade referee found that British, German and Spanish aid to Airbus for its flagship A380 superjumbo amounted to illegal export subsidies, but cleared payments made by the French government. Boeing estimated the loans were worth 3.25 billion euros ($4 billion) but Airbus declined to provide an estimate.

The ruling marks a big setback for Airbus, but is not the end of its battle - the world's largest and costliest trade dispute - with Boeing over subsidies in the market for large civil aircraft worth 2.4 trillion euros ($3 trillion) over the next 20 years.

US claims victory

The WTO panel concluded Airbus was able to launch a series of passenger jets only due to subsidies from the EU and member states, without which it would be a very different and much weaker company.

US Trade Representative Ron Kirk said the WTO's decision is good news for Boeing

"These subsidies have greatly harmed the United States, including causing Boeing to lose sales and market share. Today's ruling helps level the competitive playing field with Airbus," US Trade Representative Ron Kirk said in a statement.

"President Obama and I are committed to enforcing our trade agreements and, when necessary, using the dispute settlement process that is consistent with the rules-based global trading system at the World Trade Organization."

Examining options

The European Commission said it would decide shortly whether to appeal the 1,000-page Airbus ruling, and reiterated a call for negotiations.

"The EU remains committed to a negotiated outcome to the dispute with no pre-conditions on either side," EU Trade Commissioner Karel De Gucht said in a statement in Brussels.

Airbus communications chief Rainer Ohler also said his organization was examining its options: "Airbus, the EU and the member states are closely analyzing the report in advance of a possible review by the WTO Appellate Body."

Seventy percent of the US claims "were rejected and wild allegations have been proven wrong," Airbus's statement said. "Neither jobs nor any profits were lost as a result of reimbursable loans to Airbus."

If the ruling is upheld on appeal and the EU refuses to stop the offending practices, the United States could ask the WTO for permission to slap sanctions on EU goods.

The WTO ruled that European payments to help Airbus develop the A380 superjumbo were illegal

Repayment required?

Boeing said Airbus must repay $4 billion in illegal aid for the A380 or "restructure the A380's financing to proven commercial terms."

But Allan McArtor, chairman of Airbus Americas, said the company was not obligated to repay any subsidies found by the WTO panel or any outstanding government loans.

"There is no requirement to repay anything in the WTO process," McArtor said in an interview with Reuters new agency, adding that the ruling only imposes a future obligation on European governments that provide launch aid.

The WTO said prohibited subsidies should be halted immediately and said this meant within 90 days; but the legal process could mean months or years before this deadline is reached.